Swaption

A swaption is like a special option that can be used to make a bet on what interest rates (like the rate your bank pays you when you save money) will be in the future. It can be used if you think interest rates will go up in the future, because you can buy a swaption now and use it to pay a lower fixed rate for a loan later on - so you save money. You can also sell a swaption if you think interest rates will go down and make money from it. Swaptions are used by people and companies to manage risk and make money from predicting future interest rates.